The State of the Markets:
As we enter the final week of what is turning out to be the best January since 1989, the macro drivers of the market remain the same. Cutting to the chase, investors continue to look forward to better days ahead on both the economic and earnings fronts.
In market terms, this is called discounting. And after the President's speech in Davos on Friday, the market appears to be doing some additional discounting to the upside. The tone of the speech was much more conciliatory than feared on the trade front and as such, traders breathed a sigh of relief via their buy orders on Friday. The end result was a surprisingly good day in the market and yet another all-time high for the big-cap indices.
The key point to the current joyride to the upside is that the economy and Corporate America are expected to continue to surprise. Although the tax bill is only weeks old, we are already seeing big announcements from companies large and small. This goes well beyond the $1,000 bonuses and minimum-wage increases for the rank-and-file employees. It's as if a race is on for CEO's to announce big investments and new projects as fast as they can. And the race is likely to continue for some time.
From a macro perspective, this means that America is indeed open for business. And business is looking good. Remember, when companies like Apple (NASDAQ: AAPL) bring home hundreds of billions of dollars, invest in new plants and projects, money pulses through the U.S. economy. New jobs and expansion plans begets more jobs. It's what is being called a virtuous cycle for the economy.
While the stock market's blazing rally is clearly stretched, and the current pace is unlikely to continue for too much ...